PROPERTY II

MASTER OUTLINE

Servitudes

Creation, Assignment of Easements

Themes of the Course Regarding Covenants & Easements:

Formality vs. Informality – Written vs. Unwritten If the agreement is in writing, how is ambiguous drafting resolved? Running with the land – The landowner is bound by previous agreements determining land use Regulation of land use agreements – They are private agreements; how should they be

regulated by the court?

Servitude – A legal device that creates some kind of right or obligation that runs with the land: the land owned or possessed by one party “serves” another party. Servitudes usually “run with the land”, meaning a subsequent owner of the land is usually required to comply with the servitude despite the fact she never expressly agreed to comply.

Easement – A non-possessory interest in land that is in the possession of another: the right to use another’s land which:

A. Entitles the owner of such interest to a limited use or enjoyment of the land in which the interest exists;

B. Entitles him to protection as against third persons from interference in such use or enjoyment;C. Is not subject to the will of the possessor of the land;D. Is not a normal incident of the possession of any land possessed by the owner of the interest;

andE. Is capable of creation by conveyance.

Express Easement – An Easement in Writing. That writing should include the grantor and grantee, words used to create an easement, describe the easement, describe the affected land, and it should be signed by the grantor.

Scope – The use and extent of an easement

Dominant v. Servient Estate

Dominant Estate – The land benefitted by an easement

Servient Estate – The land burdened by an easement

Affirmative v. Negative Easements

Affirmative Easement – An easement which allows the holder to enter and use the land of another

Negative Easement – An easement which prevents the possessor of the land burdened by the easement from performing acts upon his own land (became covenants over time)

Appurtenant v. In Gross Easements

Appurtenant Easement – An easement attached to a particular parcel of land. Easements are presumed to be appurtenant

In Gross Easement – An easement personal to the easement owner

Express Easements: Grant v. Reservation

Easement by Reservation – An easement in which a grantor conveys a fee interest to another but retains rights for himself across the fee interest

Easement by Grant – An easement in which a grantor conveys an easement to another, as opposed to a fee

Easements, Interpretation and Extent

Rules of Construction: Caveats

1. If the drafting is NOT ambiguous, these rules do NOT apply and the clear language is given effect2. Further, if the width, length, and location of the easement are fixed by the granting instrument,

a court may not consider any other factors, such as what is necessary and reasonable to the effective use of the easement, in interpreting the extent of the easement.

The Rules of Construction

3. Grantor’s Intent4. Give effect to all the words5. A grant will be construed in favor of the grantee and against the grantor. The presumption is

that the grantor intended to pass all that he had unless clearly indicated otherwise.6. The Term Right of way usually conveys only an easement7. Consideration must be given to the situation and circumstances of the parties at the time it was

drafted.

Factors

1. Was a strip of land conveyed? Public policy holds that two parcels separated by a small strip owned in fee is disfavored.

2. Consideration. The less the consideration reflects the full market value of the property, the more it appears to be an easement. The greater the consideration, even if an easement, the broader the use.

3. Description. The description of an easement is not as detailed as the description of a fee. Using the words such as right of way, etc.

4. Prior Acts. If the land was used in a certain way before the easement was created, this may suggest that a continuation of that use was contemplated by the parties.

5. Subsequent Acts of how the parties have treated the conveyance. If immediately after the creation of the easement a certain use was tolerated or accepted, this implies that such a use was contemplated by the parties when the easement was created.

6. Reservation vs. Exception. Easements that are reserved are interpreted more restrictively since ambiguities in a deed are generally construed against a grantor.

7. The use restrictions on the land. The more limited use of the land the more it appears to be an easement.

8. The purpose of the conveyance (ingress and egress would tend to signify an easement).

General Interpretation

1. Grantor conveys to grantee the following strip of land, for railroad purposes…Conveys (probably a fee), strip of land with words of limitation (tends to show an easement)

2. Grantor conveys to the grantee a strip of land…Seems like a fee

3. Grantor conveys to the grantee a right of way over a strip of land…Seems like an easement

Basic Rules on Scope:

Majority Rule

An easement cannot be moved without agreement by both the dominant and servient estate once the easement has been fixed.

Minority Rule

An easement can be moved by the owner of the servient estate in certain circumstances. Provided that the relocated easement affords the dominant estate benefits that are substantially similar to those that the dominant estate enjoyed under the original easement, the servient estate owner may move the easement. See below.

Use

There is a contemplation of an increase in the basic use of the easement. (I.e. model T in 1908 and Hummer in 2008). You can change the intensity of the use, but not the kind of use. Cars have evolved,

but you cannot put a basketball court up (ingress and egress do not equal recreation). Increased use is permitted as long as no unreasonable additional burden is placed upon the servient estate.

Repairs

The owner of the easement has a duty to make repairs to the easement. The owner of the servient estate has no obligation to repair the easement. However, the servient estate owner might want to make repairs because he is responsible for any personal injury that occurs on his land (which he owns!). The servient estate owner has no duty to repair the easement, but he has a duty towards those who come on his land, which includes the easement!

Improvements

The owner of the easement has the right to improve as long as this does not unreasonably increase the burden on the servient estate.

Relocation

The owner of the servient estate cannot unilaterally move the easement under the majority rule. Both parties must agree. The minority view is that the servient estate can unilaterally move the easement if, the same rights and benefits attach, or frustrate the purpose for which the easement was created.

Arguments for the Majority and Minority views on relocation:

Relocation by Consent1. Burdens on the dominant parcel2. Rights of easement holder3. Devalue the Easement4. Judicial Efficiency

Unilateral Relocation1. Best use of property (servient estate)2. Encourage the grant of easements (people will not feel constrained in granting easements if

they know they have the right to relocate for their best use as long as it doesn’t frustrate the purpose of the servient estate)

3. Purpose of easement (prevents dominant estate from blocking servient estate when equal benefits would accrue no matter where the easement was placed)

Succession

First Step: Determine if the Easement is Appurtenant or In Gross.

Appurtenant Easements

Benefited Estate: Absent an express provision in the deed stating otherwise, an appurtenant easement is presumed to be transferred with the dominant estate. Therefore, the land that benefits from the easement is presumed to retain those benefits.

Example: If A sells to X, whoever succeeds to the benefited parcel (dominant estate) claims the benefit of the easement, unless it is clearly stated in writing otherwise. Whoever succeeds in ownership of the parcel succeeds in easement because easements run with the land.

Burdened Estate: If the servient estate is transferred, the burden of the easement runs with the land so as to be enforceable against the successors of the servient estate if the original parties intended that it run (this is presumed, absent specific evidence to the contrary) and if the successor to the servient estate had notice of the easement. See below.

Example: If B sells to Z, the succession of the servient estate is determined by the following factors:

1. Writing – The original agreement must be in writing (between the first two estate owners, not the following owners who never signed a deed, even a hundred years in the past)!

2. Intent – If the original parties at the time of the writing intended for the burden to run with the land, this requirement is satisfied. Further, Intent is PRESUMED.

3. Notice – If you had notice before purchaseA. Actual – Actual Knowledge (it was on the Deed)B. Inquiry – Something about the factual circumstances of the property that put the potential

buyer on notice that there was an easement. Circumstances that existed that put a buyer on notice (reasonable person standard, even if the owner did not inspect the property, he is still liable as a reasonable purchaser) are sufficient to satisfy this requirement

C. Constructive – In the chain of title

Must have ALL THREE of these categories (including any one of the notice prongs) to succeed in proving succession for the servient estate!

Easements in Gross

Easements in gross do not run with the land. For the benefit of the easement in gross to pass to a successor of the grantee, the easement must be assigned. However, not all easements can be assigned. If the granting instrument contains an express provision as to the assignability of the easement, it will be given effect. Otherwise, the court will evaluate it based on the following two categories:

1. If the primary purpose of the easement is to gain an economic benefit, it is deemed a commercial easement, and presumed assignable.

2. If the primary purpose of the easement is personal satisfaction, it is deemed a non-commercial easement, and is non-assignable.

EXAMPLE: B gives A the right to come and camp on his land. This is an easement in gross as A owns no land. A is a nonprofit corp. that teaches the public how to use environmentally sound camping techniques. A then wants to assign the right X.

ANSWER: Nonprofit does not mean non-commercial. If A is using the land for a commercial benefit then it is assignable.

The New Restatement: Will hold ALL easements in gross assignable unless the parties stipulate otherwise.

The burdened Estate:

Although by definition the benefit of an easement in gross does not attach to the land of the easement holder, the burden of an easement in gross does attach to the land of the servient estate. Therefore, if land subject to an easement in gross is assigned, the burden of the easement in gross runs with the land in the same way as would the burden of an appurtenant easement.

An easement in gross runs with the land if there is intent, notice, and writing. These are the same exact requirements as the burdened estate for appurtenant easement. Remember, the original agreement creating the easement is what is consulted.

Termination

Once an easement is terminated, it is gone FOREVER. This is different than when the easement is not USED.

Termination by Express Termination (The Words)

1. Duration - The Easement ends at a certain date (in the grant)2. Breach of Condition – A condition placed on the easement that is broken (Easement

Determinable, Easement Simple Subject to a Condition Subsequent)3. Purpose Accomplished – When the purpose for which the easement was created is

accomplished, OR when the purpose becomes impossible to accomplish (Easement across the land to build a house, when the house is built, the purpose is accomplished, and the easement is terminated)(Easement granted to get to the public highway. The government then closes the highway creating a park. It then becomes impossible to accomplish the goal. The easement is terminated: even if the road is reopened later, the easement is gone for good).

Termination by Subsequent Events

1. Misuse – Misuse which cannot be prevented by an injunction will end an easement. This is where scope comes in. The Jetski in the last principle problem could be resolved by an injunction. If however, the injunction could not prevent the misuse then the easement is terminated.

2. Severance – Severance of an Easement Appurtenant. A owns a dominant estate, with an easement across B’s property to get to the road. Can you sell the easement without selling the

dominant estate? NO. The easement cannot be transferred separately from the dominant estate, and it would then be terminated.

3. Release – An easement owner may terminate the use of the easement by agreeing to that in writing. A owns an easement across B’s land, B wants it to end and agrees to pay A 50,000, the parties agree and PUT IT IN WRITING, and the easement is gone.

4. Abandonment – Nonuse of an easement accompanied by affirmative acts indicative of an intent to abandon the easement. A stops using the easement across B’s land and intends to give up the right to use it. Nonuse alone is NOT ENOUGH. Bushes across an easement would be getting closer, but probably not abandonment because they aren’t removable. However, if a house were built there (permanent structure) then it constitutes abandonment. Sometimes state statutes will hold a certain amount of years for nonuse to terminate, but usually not.

5. Merger – You may not have an easement in your own land. Thus, if A has an easement through B’s land, and A buys B’s land, the easement is terminated. The physical road may still be there, but the easement has merged. This applies to both easements in gross and easements appurtenant.

6. Involuntary Destruction – Involuntary destruction in a structure. Voluntary destruction of the servient parcel does not destroy the easement. Both involuntary and voluntary of either parcel destroys it. Voluntary destruction of the dominant estate destroys the easement. When you have two structures, and one is torn down (the dominant estate tears down the servient estate) then this kills the easement unless it is put in writing.

7. Conveyance to a bona fide purchaser without notice – Destroys the easement (see the discussion above on running with the land).

Intermediate Assignment: Distinguish Easements from Licenses

An easement is the non-possessory right to use land in possession of another. An express easement must be in writing.

A license is merely a permission to enter land. (ex. Phillies ticket, authorized entry to the game). Licenses are usually intended to be temporary, limited to a specific purpose, and personal to the licensee. No writing is required to create a license, but it may be created in writing. (Ex. Going to the mall). A license can be oral, written, or implied. Licenses are revocable, but they are not transferable, unless negotiated otherwise. Licenses can’t be inherited or left through a will.

Licenses are terminable at the will of the creator. Easements are not revocable at will.

Distinguishing Licenses from Easements: (Similar to distinguishing Fees from Easements)

1. An easement is for a designated area (more specific description, more likely an easement)2. Easements are normally for a specified time (or perpetuity)3. Consideration – The more you paid for it, the more it looks like an easement. You pay more for

rights than simple permission.4. Improvements and Repairs Factors tend to show an easement. If the owner has substantial

control in this way the more it looks like an easement.

License vs. Easement Factors Continued: The Rights

1. Intent of the parties2. Duration of the “right” created3. Amount of consideration given for the “right”4. Whether there is a reservation of power to revoke the “right”5. The nature of the “right” created – The obligations created between the parties regarding the

right itself.

Non-Express Easements

Implied Easements

Arise in situations where the easement itself is not written into a conveyance, or there is no writing at all. The court views implied easements where the parties must have intended for there to be an easement, because it would not make sense otherwise, but where the parties forgot to put this in writing. Because of the circumstances the law infers an easement.

There are two kinds of Implied Easements:

1. Easements Implied by Prior Use2. Easements Implied by Necessity

Elements of Easement Implied by Prior Use:

1. Common ownership of the original parcel2. Prior to the severance, part of the land was used apparently, continuously, and permanently for

the benefit of another party; and that use was apparent, continuous, and permanent to the purchaser of the burdened land;

3. The easement is necessary and beneficial to the enjoyment of the dominant parcel.

Elements of Easement Implied by Necessity:

1. Common ownership2. Land Severed3. Severance Creates Necessity for Easement

This is distinguished from an implied easement by prior use, because there was no prior use before the

severance. In an easement by necessity, the severance itself creates the necessity.

Scope:

Easement Implied by Prior Use – Scope is established by whatever the extent of the prior use was before the land was severed by a common owner.

Easement Implied by Necessity - Easements by Necessity are determined by whatever is reasonable to make the land useful. Severance creates the necessity in the first place; then the question is what will be reasonable in creating an easement out of something that did not before exist.

Intermediate Assignment: Prescriptive Easements

Prescriptive Easement Defined

Prescriptive Easement – Adverse Use (Hostile, Open, Exclusive, Continuous, Actual Use, and for as long as the statutory period requires). The presumption is that someone is on your property without your permission, that they are trespassing. To get a prescriptive easement, you have to be a trespasser.

Prescriptive Easements differ from adverse possession by making a distinction between: Title (Adverse Possession), and Use (Prescriptive Easement). For the trespasser, it makes sense to try for adverse possession to gain title, and even if the elements below aren’t met, they might get a Prescriptive Easement. The elements are the same as adverse possession in most jurisdictions, but the more intense, structures, improvements, etc it looks like title, without those it looks like an easement.

Elements of a Prescriptive Easement

Open & Notorious– The actual owner does not need actual knowledge, but the reasonable owner should know that there was a trespass.

Continuous – Some kind of pattern of use is being established (doesn’t have to be 24/7). Remember the summer home example from property I. If someone comes across the land once a week, they might get a prescriptive easement to do just that (if other elements are met) because the scope is determined by the use.

Actual – There must be some physical presence on the estate.

Exclusive – Simply means that the landowner has not done something to exclude you. The landowner has not built a wall to keep you out, etc. If you are a landowner you have to watch your property and act to get people out. Remember, prescriptive easements are non-permissive, you can always give permission.

Adverse & Hostile – Must be without permission. If you receive permission to come onto the property you are giving a person a license.

Statutory Period – Must continue for however long the time period the statute provides.

Scope of a Prescriptive Easement

The Scope is established by the extent of the trespasser’s prior use of the property.

Easement by Estoppel – If plaintiff is granted a license which is summarily revoked by defendant, if plaintiff had necessarily relied upon the use of the use of the license, it may turn into an easement.

Covenants

See Covenants Worksheet

Like easements (but not licenses!), covenants fall under the general heading of servitudes. Covenants are an agreement between two parties that sometimes run with the land. Covenants are private agreements (not zoning, or government regulation) between two private parties (Usually an individual and his homeowner’s association). The government is not a party to this agreement unless the matter goes before the court to be litigated. Covenants further have the ability to regulate aesthetics, something the government generally cannot regulate, and often operate to preserve property values.

Just as with easements, covenants necessarily entail a burdened and benefited parcel. It is usually easy to see what the burden of a covenant is, but much more difficult to discover the benefit.

Covenants come in two varieties:

Real Covenants – Enforced by either damages or injunction [PRIVITY REQUIRED]

Equitable Servitudes – Enforced by an injunction ONLY. [PRIVITY NOT REQUIRED]

PUBLIC POLICY ANALYSIS:

Analysis of Covenants (Public Policy Analysis):

1. Does the covenant violate public policy? [Issues like consent/notice are found here]2. Does the activity complained of violate the terms of the covenant? [Ambiguity/Clear language]3. Does the covenant run with the land?4. Are there any defenses available to preclude enforcement of the covenant? [Termination]

Question 2 Specifically: Does the Activity complained of violate the terms of the covenant?

1. What is the specific activity that is prohibited? [Look to the language of the agreement, what category does this prohibited activity fall under?]

2. What is the activity complained of? [Factually, what’s going on?]3. How does that activity violate the covenant? [Questions 1 and 2 combine into 3 here]4. What is the purpose of the covenant? [Ties in to the question below]5. Does activity complained of violate the purpose & spirit of the covenant?

The main purpose of the court is to decide if the covenant is either a reasonable restriction, or an arbitrary one.

The first step of the analysis should be to figure out whether or not the covenant prohibits the named activity. Second, if the covenant does prohibit the activity or is ambiguous, you must figure out what the purpose of the covenant is, and how it relates to your activity. This is where the court will bring in public policy arguments.

Exam Note: Should address the public policy issue at the beginning of the exam

RUNNING WITH THE LAND ANALYSIS:

The Elements of Running

Element 1: Writing. The original covenant must be in writing

Element 2: Notice. The burdened party must have had notice at the time of purchase that the original covenant burdened the land. There must be actual, constructive, or inquiry notice. The benefited party does NOT have to have notice at the time of purchase in order to enforce the covenant (obviously, some notice came later).

Element 3: Intent. There must be a manifestation of intent of the original parties to bind their successors to the covenant; this applies to both the benefited and burdened side. The best intent is in writing; but short of a writing courts will look to the factual circumstances.

Element 4: Touch & Concern. Has expanded, and evolved into two separate questions:

Does the benefit touch and concern the land? Does the burden touch and concern the land?

The law is simply trying to prevent the running of those promises whose running is likely to prove “too inconvenient” either to society or to the successors of the promisor. In deciding whether a promise is likely to be too inconvient if it runs, one should weigh the advantages of permitting this type of promise to run against the disadvantages.

Helpful Note: The first four elements are elements of an equitable servitude, which allows enforcement through an injunction. If you can prove all these four elements, you can then get an injunction. But to get damages, you need to prove a real covenant. To get that, you must prove the first four, AND privity.

Element 5: Privity. Privity appears in two varieties:

Horizontal – The relationship between the two original parties to the covenant at issue. [Some Courts DO NOT require horizontal privity any longer]

Vertical – The relationship between the original party and the successor. [Strict Vertical Privity vs. Relaxed Vertical Privity]

HORIZONTAL

For horizontal privity to be effective, the two original contracting parties must fall into one of the following three categories:

1. Landlord & Tenant2. Easement Holder & Owner of Servient Estates3. Grantor & Grantee

If the original owners satisfy any one of these requirements at the time the covenant is formed, horizontal privity is established and this step of the analysis is complete. Note, however, that any other relationship between landowners (and they must be landowners) does not satisfy horizontal privity, most notably the relationship between two neighbors. If two neighbors agree to form a covenant, horizontal privity is not established!

VERTICAL

Vertical privity falls into two distinct categories:

1. Relaxed Vertical Privity2. Strict Vertical Privity

The benefited side of the covenant will always come under the standard of relaxed vertical privity. Relaxed vertical privity simply means that the landowner succeeding the benefited estate can succeed to any portion of that estate. The burdened side of the covenant will always come under the standard of strict vertical privity. Strict vertical privity means that the landowner succeeding the burdened estate must have succeeded to the entire parcel of land that was a part of the original covenant. Just as horizontal privity deals with the relationship between the two original covenanting landowners, vertical privity deals with the relationship between the successors of those two parties.

The first step in the analysis is to determine which side is benefited and which side is burdened. To do so, ascertain who is suing who. The party suing for relief is always the benefited party, and the party defending is always the burdened party. Remember, that covenants can be equitable (benefits and burdens attach to both properties) but this changes the moment the lawsuit is brought. Once the benefited and burdened estate are established, apply strict and relaxed privity and analyze the problem.

Enforcement & Running of Covenants

Touch & Concern Problem Set (See Handout):

1. Yes2. Yes, for the burden because there’s a restriction on the land use controlling what business can

be built or used on the land. That may impact the value of the land. The benefit also touches and concerns the land by reducing business competition.

3. It limits his freedom of contract, he can only contract with O. Does that burden touch and concern the land? One argument is no, because it’s a personal contract for services that doesn’t touch and concern the land. Another is yes, because this could impact the quality of the structure on the land because O must construct the building. It will depend on the quality of the

construction. Note: Price & Value are not always the same thing (father’s love example). If the benefit is only O’s construction company, then it only affects him and not the land. So the problem here is whether or not this is a contract between only two people, or is there an element of touch and concern? Tough to tell. Most people would see this as O’s business interest and not his land.

4. Price may not have anything to do with the value of the land, seems like this is a personal debt and not a debt connected to the land. Don’t confuse price with value!!! Value is determined by the land, the construction, etc. Price could be impacted with factors that have nothing to do with value.

5. Yes, the covenants burden does touch and concern A’s land. A is the current landowner and the covenant burden’s it. O can now mine the land without any concern for injuring the surface, because he’s no longer liable for that damage. That makes O’s land all that much more valuable. The question about personal injury does not touch and concern the land.

Privity Problem Set (See Handout):

1. None, because the A and B are just neighbors, which means there is no horizontal privity (page 482).

2. A can seek the injunction, no privity is needed, there’s no issue about running (binding successors, and these are the original parties!), and all the other elements are met. A can seek damages as well for the same reason, need no privity of estate, have privity of contract.

3. Don’t need privity for an injunction, and the other elements are met, therefore C can sue them. You need privity for the suit of damages. The benefited side requires relaxed privity, which is met on the benefited side. Remember, some jurisdictions don’t require horizontal privity at all to sue for damages. If you need horizontal privity, because they are neighbors, there is no horizontal privity and therefore no damages if the jurisdiction requires it. Vertical privity is strict on the burdened side, and relaxed on the benefited side. Horizontal privity is a total disaster, make sure you outline this later. If it does exist, most jurisdictions hold that horizontal + vertical must exist on the burdened side. On the benefited side they say just look at vertical in general. If the original parties are in one of the 3 categories on 482, horizontal is met. If they are neighbors, it is not.

4. Yes, for an injunction, if all the other elements are met, there is no need for privity. Therefore, C can look to D for an injunction. Can C look to D for damages? Vertical privity is met, there are sales on both sides of the same properties. The question becomes what jurisdiction you are in. Horizontal privity required? You’re screwed, the original parties were neighbors. Horizontal privity not required? You’re Ok. Privity of estate is only an issue of running (vert), for the original parties, they signed a contract so you have privity of contract (horizontal). The answer for the second party of the question is yes assuming jurisdiction doesn’t require horizontal privity.

Restatement – Factor Test (Not all elements must be met, simply factors that must be looked at)

1. Intent of the Parties

2. Did the Covenant have an impact on the considerations exchanged when the covenant was originally executed?

3. Whether the covenant clearly and expressly sets forth the restrictions4. Notice5. Reasonable concerning area time or duration. Courts disfavor covenants extending into

perpetuity6. Unreasonable restraint on trade or secure monopoly?7. Interference with public interest?8. Have changed circumstances affected the covenant so as to make it unreasonable?

Advantage of this analysis: Gets away from the technical definitions of the elements.

Disadvantage: Not nearly as much certainty.

Most courts still use the technical analysis, and if they have difficulty it is in touch & concern.

Defenses to the Enforcement of Covenants

Termination Doctrine for Covenants (DIFFERENT THAN THOSE FOR EASEMENT)

1. Laches (Equitable Doctrine) – An undue or unreasonable delay in enforcing the restriction. [Ex. I have a restriction against a neighbor putting up commercial buildings. I never object as the neighbor builds the Wal-Mart. Then once the Wal-Mart is up, you go in to court and try to get an injunction. This would fall under latches, a simple fairness doctrine, you cannot sit on your rights too long to the detriment of the other party.

2. Release – All the benefited and all the burdened parties get together and sign a release, releasing all the land from all the covenants restricting it.

3. Language – Covenant language may have a duration (10 yrs, 20 yrs). That specific language will end the covenant.

4. Abandonment – The owner of the benefited estate evinces an intention to give up all the benefits of the covenant. That owner is abandoning the benefit of the covenant; it is of no value to the owner anymore and it is being abandoned. Need words + conduct for abandonment. [Owner of covenant stops seeking enforcement against violators who have businesses in their residential homes. This could constitute abandonment.]

5. Acquiescence – The owners of the benefited estate tolerate previous violations by the burdened estate. The specific kind of violation was tolerated, so the next person who wants to put up a day care is allowed to do so.

6. Unclean Hands (Equitable Doctrine) – The beneficiary is in violation of the covenant they seek to enforce [See handout of “Too much Homework.”]

7. Relative Hardship – Hardship to the owner of the Servient estate far outweighs the benefit that the owner of the dominant estate is getting. Usually, there is some kind of substantial harm to the burdened estate with not much benefit flowing to the benefited parcel. Most courts don’t

consider financial loss (a best, most profitable use of the property. Building a CVS on the property would increase property values would not work)a hardship! Courts require that burdened estate show that there is no beneficial use at all for the estate. There must be some other kind of physical facts (usually, undeveloped land from the covenant, and the benefited estate isn’t getting anything out of it as a result) is what is required. This requires a balance between the benefited and burdened parcel.

8. Changed Conditions – Substantial changes that deprive the covenant of the substantial benefit to the owner of the dominant estate. First, articulate the substantial changes (factual). Second, find the purpose of the covenant. Third, find that the changes have stopped the benefit flowing to the owner of the dominant estate. For this doctrine, you must look at changes in the neighborhood and a direct look at the benefited parcel.

The Requirement of a Written Instrument

6 Basic Steps: Residential Real Estate Transactions

1. Listing Agreement between Seller & Broker2. Negotiations between Buyer & Seller3. Purchase & Sale Agreement4. Executory Period5. Closing6. Post-Closing issues, such as non-disclosure

Step 1: The Listing Agreement between Seller & Broker

Buyer decides he wants to buy a house, and finds a real estate agent. The real estate agent does not usually represent the buyer. Most often, the real estate agent legally represents the seller. His commission is paid by the seller, and his contract is signed by the seller. This is not to say there aren’t fiduciary duties owed between the buyer and seller, but the legal duties are primarily with the seller and broker.

The seller might want to put a higher value on a house than the actual market value that the broker has estimated. The broker has a contract with the seller, and the broker is paid a commission based on sale price. The buyer wants the lowest sale price! This is of course a conflict. But remember broker and buyer do have fiduciary duties.

Step 2: Negotiations between Buyer& Seller

Buyer and Seller begin to negotiate price, as well as other terms. When will the seller move out? Who gets to keep the drapes that coordinate with the wallpaper? Will the stove be replaced at the seller’s expense? These things must be negotiated, and then put in writing. There is nothing that is too small to be reduced into writing.

Step 3: Purchase and Sale Agreement

In this agreement, the seller agrees to convey and transfer title to the buyer. The buyer makes a deposit, and promises to pay the remainder of the sale price at closing. Should an attorney write the purchase and sale agreement, or is a form document OK? What happens when the purchase and sale agreement is not in writing?

Step 4: The Executory Period

This is the time between the purchase and sale agreement and the closing. The big question here is on whom the risk of loss should fall. The purchase and sale agreement is only a promise to convey. The seller has legal ownership of the property until the closing. The buyer may have some kind of interest in equity in that property. What happens if during that time period, there is a fire or flood on the property. Who gets the risk of the loss? Who gets the insurance proceeds? Does the seller have to repair the property and put it back in a certain condition? Sellers legal title vs. Buyer’s equitable interest.

Step 5: Closing

The seller wants one thing (money). The buyer wants one thing that there is good title to be conveyed, and that it is to be conveyed. The bank that’s holding the mortgage wants to see good title as well.

Step 6: Post-Closing Issues; Non-Disclosure

Something happens to the property after the buyer has moved in and paid for the property. Does the buyer have some grounds upon which to sue the seller? Implied warranty of fitness, non-disclosure, etc?

The deed is the basic way to convey any kind of property interest (whole property, easement).

Requirements for a valid deed

1. Must be in writing2. Must be signed by the grantor3. Must identify the grantor and the grantee4. Must contain words of conveyance (“I convey this property to you in fee, I grant an easement..)”5. Must describe the property (Fee or easement)

First two elements come from the statute of frauds. Some states (p.844) give forms with these requirements.

Contracts for the Sale of Real Estate

The Purchase & Sale Agreement

The Purchase & Sale Agreement is distinguished from a deed in that it is a contract through which a Seller transfers land to a Buyer, as opposed to the unilateral transfer of title through a deed. The Purchase & Sale Agreement is governed by the Statute of Frauds. The Statute of Frauds imposes certain requirements on these contracts:

1. The contract must be in writing2. The contract must identify both parties3. The contract must be signed by both parties (as opposed from a deed)4. The contract must adequately describe the real estate to be transferred5. The contract must state the price if the price has been agreed upon. If not, the court will

assume fair market value for the property

If the preceding requirements are met, the contract will be valid under the statute of frauds. If any of the requirements are missing, it is not a valid contract and will be voided.

What if the Purchase & Sale Agreement is not in writing?

Although a Purchase & Sale Agreement not in writing is generally barred by the Statute of Frauds, the law has carved out two main exceptions.

Exceptions to Statute of Frauds:

1. Partial Performance2. Reasonable & Detrimental Reliance

Partial Performance

Partial Performance applies to situations where the Buyer has begun to perform various obligations that signified he believed the oral contract was valid.

Partial Performance Factors:

1. Possession2. Payment3. Improvements

Courts will look primarily for evidence from these three categories in making a determination that an oral contract falling within the Statute of Frauds can be enforced via the Partial Performance Exception. Remember though, these factors compose an equitable doctrine: even if they are all satisfied, the court may still not enforce the oral contract.

Reasonable & Detrimental Reliance

Reliance theory is the second exception to the Statute of Frauds, and applies when the Buyer has changed his position to his detriment after reasonably relying on the oral contract. If the court finds that reliance theory applies, it can order specific performance of the oral contract.

One court has developed a test to ascertain whether or not an exception to the Statute of Frauds should apply:

Unequivocally Referable - The only way to explain the reason one party acted why they did is the existence of a purchase and sale agreement.

Oral Contract Analysis Preliminary Steps

If a problem requires analysis of an oral contract not based on writing (i.e. section 1 & 1A are not applicable), the first step in the analysis is to establish EVIDENCE that an oral contract existed between the two parties. Next, you must provide evidence of the TERMS of the oral contract that the court should enforce if they rule for your client. Finally, you must demonstrate that the acts of your client UNEQUIVOCALLY and UNMISTAKABLY point to an oral contract for the sale of property. This burden is not satisfied if there is a reasonable alternative, such as an employment contract or familial relationship. Only then will the court allow you to present evidence of part performance, as presented in 2B (i, ii, and iii below). This standard is very difficult to meet.

Oral Contract Analysis Outline

1. Is there a written document? [If so, apply above Statute of Fraud provisions & analyze]A. Does that writing satisfy the statute of frauds? [If it does, go no further]

2. Has there been substantial part performance to take out of the statute of frauds?B. What evidence of partial performance can you find?

i. Possessionii. Paymentiii. Improvements

C. What evidence of reasonable detrimental reliance can you find?D. Any major policy considerations [Note, self-added]

Deed Must Be Delivered

Do not confuse the deed with the purchase and sale agreement. The deed is the instrument by which the title transfer is made (which is why only the grantor signs it). Deeds have five components (listed above, and repeated here for clarity):

Requirements for a valid deed

1. Must be in writing2. Must be signed by the grantor3. Must identify the grantor and the grantee4. Must contain words of conveyance (“I convey this property to you in fee, I grant an easement..)”5. Must describe the property (Fee or easement)

Analysis of a Deed:

Make sure that the seller’s name is listed in the document exactly as they were when they were the buyer. The buyer’s name must be written as the buyer wants it to be. If it’s a concurrent estate, it must be clear what it is: Joint tenancy, tenants in common, etc. The land description must be accurate. Then it must be signed in accordance with local requirements (witnessed, notarized, etc.). A deed that’s good on its face ONLY transfers title when it is delivered (deed’s that are not good on its face is not good even if delivered).

Delivery

In the olden days, property was transferred by a symbolic exchange of dirt from one party to another. There are two kinds of modern delivery:

Manual Delivery – Manual delivery refers to the actual physical delivery of the deed. The deed is handed across the table from the grantor to the grantee. The general rule is that if the deed can be physically handed to the grantee, it should be. Remember, the deed is title to land. Manually handing over the deed without intending to convey property is not good enough. The grantor must also have an intent to be a transfer of property.

Constructive Delivery – Constructive delivery is a substitute for manual delivery, and which in some situations satisfies the delivery requirement. In constructive delivery, the deed is not physically handed to the grantee, but there is some act that evinces the intent of the grantor to transfer it. It may be put in a safe deposit box, or it may given to a third party for safekeeping. The following is the appropriate formula through which any delivery problem should be analyzed:

Delivery Analysis:

1. Was there manual delivery?2. If not, was the deed recorded by the grantor? (Recording by the Grantor presumes delivery)3. Was there constructive delivery?4. Are there other acts subsequent to the signing of the deed manifesting a change in ownership?

Delivery Not Enough:

Remember, you also need to prove grantor’s intent! Besides the requirement that the deed be facially valid under the law, delivery alone does not constitute an acceptable transfer of land unless the grantor also intends to convey that land!

Real Estate Brokers

Two main questions in this chapter:

1. Real Estate Agent’s Duty to Disclose

2. Real Estate Agent’s Commission

After Buyer & Seller sign the listing agreement (which is a contract) the Real Estate Agent is then authorized to look for a ready, willing, and able buyer. The listing agent is the one that the seller uses, and the cooperating agent who works for the buyer. Remember: the contractual duties are between the broker and the Seller, not the buyer, although fiduciary duties attach between the broker and the Buyer.

The Real Estate Agent’s Commission: When is it due?

Traditional Rule

When the Broker finds a ready willing and able Buyer who signs the Purchase & Sale Agreement, the commission was due, REGARDLESS of whether or not the Buyer closed on the deal. So if the Buyer backed out due to financing, a change in circumstances, etc. the commission is still due. Even so, it was not usually paid until closing, when the seller has the money to pay the commission.

Modern Rule

Courts have found that the responsibility is with the Broker to procure a ready, willing, and able Buyer. If the Buyer signs the Purchase & Sale Agreement, but is unable to close on the house, that Buyer is not a ready, willing, and able buyer and so no commission is owed. Brokers attain their commission from the Seller when the property is closed upon instead.

The modern rule enforces a fault based test regarding the commission. If the Buyer acts unreasonably in backing out of the contract, Courts have held that the Broker may recover his commission from the Buyer for breach of fiduciary duty (even though no contract ever signed between the two parties!). If the Seller acts unreasonably in preventing a willing Buyer from purchasing his property, Courts have held that the Broker may recover his commission from them. This is done in order to prevent fraud, and reward the Broker for his work.

The Real Estate Agent’s Duty to Disclose

Caveat Emptor – Buyer Beware, no duty to disclose short of committing fraud upon the Buyer.

Duty to Disclose Material Facts – Over time, the doctrine of caveat emptor has eroded and Brokers are now recognized as having a duty to disclose in a majority of jurisdictions. This duty is also known as the doctrine of Fraudulent Disclosure: “If Broker knows facts materially affecting the value or the desirability of property offered for sale and these facts are known or accessible only to him and his principal, and the broker or agent also knows that these facts are not known to or within the reach of the diligent attention and observation of the buyer, the broker or agent is under a duty to disclose these facts to the buyer.”

Duty to Investigate/Inspect – A minority of jurisdictions have ruled that Brokers have a duty to reasonably inspect the premises of their clients, and disclose anything they find to the Buyer. This

doctrine is used to make certain that Brokers do not claim ignorance of a defect in the Seller’s home and thus do not disclose it to the Buyer. However, not all responsibility is with the Broker. The Buyer has a duty of reasonable care to notice any defects, and should make all efforts to bring these to the attention of the Seller in order to shield himself from responsibility after the deal goes through.

Contracting for Marketable Title

Purchase & Sale Agreement

Contracting for Marketable Title is accomplished through the Purchase & Sale Agreement. The Purchase & Sale Agreement governs the process through which both parties negotiate to take title. After the deal closes, any problems with the title of property are governed by the Deed. This makes the terms of the Purchase & Sale Agreement absolutely critical to a successful closing.

Structure of Agreement & Encumbrances

Under a typical Purchase & Sale Agreement, the Buyer’s bank will usually search for any encumbrances burdening the property. Encumbrances come in 5 varieties:

Liens Leases Mortgages Easements Covenants

If one of these defects is found, the Buyer will notify the Seller about the defect. Then, depending on the contract, the Seller will have to cure the defect in a reasonable amount of time. If the Seller cannot cure the defect, the contract is rescinded because an encumbrance disqualifies marketable title, which both parties had contracted for. If the Seller refuses to rescind the contract, the Buyer can seek damage remedies.

Legal Defect v. Structural Defect

It is important to distinguish between legal defects (defects to the title of the property) and structural defects (defects that affect the Seller’s duty to disclose). Therefore, if the roof of the property collapses after the Buyer moves in, this is a structural defect, and the appropriate analysis is under the real estate broker’s duty to disclose (see Assignment 43). Contra, if the roof of the property violated a preexisting covenant, the appropriate analysis would under a defect to marketable title.

Marketable Title

Nebulous term, but generally means title free from reasonable doubt, but not from every doubt. Perfect title is not required, only reasonable title.

Title that will ensure the Buyer’s quiet enjoyment of his property Title that a reasonable prudent businessperson would accept Title such that it would not expose the Buyer to litigation

Common Defects in Marketable Title

Seller lacks title to the estate he wishes to sell

If the Seller lacks ownership of his property, he cannot sell it to Buyer. However, Seller and Buyer may agree to contract for an interest the seller does have ownership of, such as a life estate.

Seller’s title is subject to an encumbrance

The general rule is that title is unmarketable if the Seller’s title is subject to an encumbrance (Lien, Lease, Covenant, Easement, and Mortgage). Zoning laws do not constitute encumbrances, nor do visible easements (notice). Encumbrances can be conveyed if the parties agree to them. This is normally done via “subject to” clauses and “exceptions” statements. There are several exceptions to this rule.

Seller’s title violates a covenant

Even if the Buyer agrees to take possession subject to a covenant, there is no agreement to a violation of the covenant. (Ex. Covenant requires that the house be painted a certain color. If the Buyer purchases a home that is in violation to the covenant, the contract can be rescinded before closing).

Marketable Title Analysis Outline

Primary Issue: What kind of title did the parties agree to contract for?

1. What is the defect that the Buyer is objecting to? 2. Is the problem with the property a TITLE defect? 3. If the problem constitutes a title defect, is it excused under the terms of the sale contract by a

“subject to” or “exceptions” clause? 4. If the title defect is not excused by the contract, has the buyer in some way waived his right to

object or is the defect insubstantial or curable? 5. Is the Buyer able to rescind the contract?

Recording Statutes

Main Question in this Chapter

Which party has better title to the property, and thus will succeed in claiming ownership?

The Deed

A deed is the instrument through which land is titled, and is used to put the world on notice about the tract of land in question. A deed does not have to be recorded to be valid, and it is possible to record an invalid deed.

Deed valid without recordation

Every state has a recording statute. Although these statutes encourage grantees of interest in real estate to record their grants, most do not make recordation essential for the validity of a deed. However, deeds that are not recorded do not gain the protections of the recordation system.

Process of Recordation

After the grantor delivers the executed deed to the grantee, the grantee presents it to the Recorder’s Office for the county in which the land is situated. The copy is retained in the Recorder’s Office, and the original is returned to the grantee. The copies are placed in the deed bocks in the order it was received.

Grantor-Grantee Index (See Handout)

Common-Law Rule of Recordation

Whoever the land is transferred to first wins. So O transfers to A and then to B. A has better title, and B has no title. The problem is that B would never know that O had transferred his property to A. This is where recording statutes spring from.

Recording Statutes

1. Race – Whoever records first wins! The first person to record their deed at the courthouse has better title.

2. Race/Notice – The subsequent purchaser has better title than the first purchaser if he shows two things. He must have purchased without notice, and he recorded first.

3. Notice – The subsequent purchaser wins if he takes title to the property without notice.

See Recording Statutes Handout

Notice Review

3 Forms of Notice:

Actual Knowledge Inquiry Notice (Circumstances should make you aware of the condition) Constructive Notice (Recorded)

Notice is measured at the time of purchase, not what the Buyer finds out afterwards. Note the similarity to the notice requirements for the succession of easements; the same types of notice are required here. A subsequent Buyer must be a PURCHASER to gain the protection of the recordation statutes.

Short Outline

Property Outline

I. Servitudes – Non possessory right to control land use of othersa. Easement – right to another’s land

i. Right to land useii. Statute of Frauds applies (Needs to be in writing technically)

iii. Non-revocable and usually permanentiv. Transferablev. Easement is Appurtenant if – attached to the land (not a person or entity) and

cannot be severed from the land ownership package (BOTH benefit and burden run with land ownership)

1. Automatically transfer as they run with land ownership2. Cannot be severed from land ownership

vi. Easement is In Gross if – burden attaches to land, but benefit does not (it is personal and/or benefit is unrelated to land ownership)

1. Generally transferable if intended to be2. Depends on nature of easement and intent of grantors

vii. Scope of Easements1. What kind of use is permissible2. Is it divisible among multiple new users

a. Depends on grantors intentb. Presumed if appurtenantc. If in gross, is easement exclusive to holder

i. Yes – it is apportionabled. Consider societal interests to fill in gap in grantors intent

3. What are physical parameters of easement4. Is easement use a “surcharge” on the estate (Is it an unreasonable

additional burden)a. Grantors intentb. Balance interests of easement holder in free development verse

interests on servient estate holder in securityviii. Limits on Easement Creation

1. No easements in 3rd party (traditional rule some states retain)2. Negative easements cannot be created by prescription3. Only the following easements on OWN Land have been recognized so

fara. Lateral and sub-adjacent supportb. Right to water flow (depends on state law)c. Conservation (prevent development)d. Historic preservation (this could be affirmative too)e. Right to light and view not being blocked

i. This right will arise only by contract or government regulation NOT by common law

1. Except possibly for solar energy easementix. Termination of Easements

1. By written agreement2. By own terms3. By merger (both estates owned by same person)

4. By abandonmenta. Conduct of easement holder indicates intent to abandon mere

non-use is not enough5. Adverse possession or prescription by servient estate holder who takes

back easement rights6. Frustration of purpose – purpose of easement has become impossible

to accomplish or no longer serves its purpose7. Marketable title acts – in some states easements must periodically be

rerecorded to be bound to future ownersII. Types of Easements

a. Easements By Estoppel (Irrevocable)i. Landowner Conduct: Landowner induces licensee to act in reliance on access to

property (by granting license or acquiescence)ii. Licensee Conduct: Acts in reasonable reliance (invests money or labor or etc.)

iii. License is made irrevocable and lasts “so long as its nature calls for” (usually permanent)

b. Constructive Trustsi. Benefit conferred on trust owner

ii. Unjust under circumstances to allow trust owner to retain benefit1. Depends on facts and relationship of parties: look for mistake, fraud,

quasi fraud, breach of trust or confidenceiii. Remedy: variable to some degree, non titled owner will get benefit and title

owner will have to expunge benefitc. Easements by Prescription

i. Actual use (instead of possession like a title owner for adverse possession)ii. Open and notorious (puts title owner on notice)

iii. Adverse (Hostile)1. No permission by Title Owner (Majority view)

a. Generally presumed (Burden of proof on title owner to overcome presumption)

b. Did title owner expressly grant permissioni. Yes – no hostility

ii. Deny – hostilityiii. Silence/ambiguity – presumed hostile

c. If public access property then presumed permissive2. Some states evaluate trespassers state of mind (Minority view)

a. Good faith required – trespasser must be not aware they are trespassing (look for mistake or color of title)

b. Bad faith required - trespasser must intentionally trespassiv. Continuousv. For the statutory period

vi. Exclusivity not required as it is for adverse possession, can be shared with the title owner

vii. Policy Rationales for Prescriptive Easements and Adverse Possession1. Tresspasser Conduct

a. Reward land use by claimantb. Reliance on Title owner’s non action

2. Title Owner Conduct

a. Recognize implicit waiver/acquiescence by title ownerb. Title owner inaction causes loss

d. Easements Implied By Prior Usei. Overall consider grantors intent verses claimants interests verses societal

interestsii. Elements:

1. Common ownership of land prior to severance2. Use before severance

a. Of one part of the land that benefits another part of the landb. That is apparent and continuous

3. Claimed easement is necessary and beneficial to enjoyment of landa. Necessary – reasonably convenient and is an elastic concept

e. Easements Implied By Necessityi. Overall consider grantors intent verses claimant interests verses societal

interestsii. Elements:

1. Severance of title to land held in common ownership2. Claimed easement is necessary at time of severance

a. Necessary – with out easement no effective use of the land could be made

i. Look for landlocked parcel – land surrounded by “strangers” (private landowners) and legal access to public road only via grantors property

ii. Lasts as long as necessity doesf. Easements Running With The Land

i. Means that easement attaches to land ownership and burdens or benefits current and successor owners

ii. Easement by estoppel, prior use, and necessity generally run1. If intended to and if they are reasonably necessary to enjoy the

dominant estateiii. Requirements

1. For the burden to run with the servient estatea. In writing in deed or referenced in a deedb. Intended to run expressly stated or impliedc. Notice

i. Actual – Landowner in fact knows of easement1. Inquiry Notice – visible signs from observing the

property suggests that a reasonable buyer should investigate further whether there is an easement

2. Record/Constructive Notice – a proper title search would reveal the existence of an easement

2. For the benefit to run with the dominant estatea. TEST – benefit runs with the land if grantor intended it to

i. Intent can be express or implicit

ii. If ambiguous, ask is easement useful apart from ownership of land or is it primarily useful to anyone who owns the parcel

1. If useful to anyone who owns the land it is likely intended to run with the land

iii. Preference or presumption of appurtenance commonly exists

III. Covenant – obligation on one’s own landa. Rights and obligations of original covenanting parties

i. Basic idea – if you no longer own the land to which the covenant is attached, you will no longer be burdened or benefited by the covenant

ii. Policy against enforcement of covenants in gross – the benefit cannot be enforced by someone who does not own land to which the covenant is attached

iii. Exceptions1. Homeowners association2. Government3. Charity

b. Running Covenants i. Means that covenant attaches to land ownership and burdens or benefits

whoever owns landii. For both burden and benefit to run the covenant must be

1. In writing2. Intended to run

a. Must analyze separately for burdened and benefited estateb. Depends on grantors intentc. If deed says “magic words” then YES

i. Covenant to grantor/grantee heirs or assignsii. Intended to bind future owners

iii. Intended to run with the landd. If deed is silent consider

i. Presumption of intent to run if touches and concerns land

ii. Facts and circumstances test to determine intent1. Is the covenant primarily beneficial if it does run2. Does benefit increase value of dominant estate

3. Notice to burdened partya. Actual – landowner in fact knows of covenant, was told or

otherwise was awareb. Inquiry – visible signs from observing the property would

indicate property is burdenedi. Unlikely since most covenants are restrictive (hard to

see something is NOT being done) but perhaps a uniform pattern of use could suggest residential only covenant

c. Record/Constructive – a proper title search would reveal the existence of a covenant

4. It touches and concerns land – what kind of restrictions legitimately will create a corresponding benefit to land

a. Must analyze separately for burdened and benefited estateb. Traditional test – does covenant have to do with land use

i. Does it affect the quality, value, or mode of enjoying the burdened and benefited property

ii. Does it affect the parties interests as landowners – is it most useful if attached to land ownership

iii. If there is intent to run likely touch and concernc. Similar but distinct from intent to run which looks at intention

of parties – this says regardless of intent is this a legitimate restriction

d. Modern Test – is covenant reasonable5. Privity of estate (required for real covenant not for equitable servitude)

a. Must analyze separately for burdened and benefited estatec. The Writing Requirement

i. Writing should be in a formal document1. In deed to each burdened and benefited parcel2. In original deeds attaching covenant 3. Referenced in a later deed4. Stated in declaration of restrictions or a plat

ii. If writing requirement not clearly satisfied consider1. Equitable estoppel based on

a. Sellers conduct/inducementi. Other writing evidencing promise (sales literature, ads)

ii. Oral representationsb. Buyers reliancec. Inequity of no covenant

d. Horizontal Privity of Estate – law is willing to impose restrictions on land use only if there is some corresponding benefit to someone else’s land use

i. So there must be a shared connection to the land at time promise is madeii. Look for a transaction between the parties – a transfer of a property interest

1. Mutual (simultaneous) – grantor/grantee have shared interest for a period of time, grantor retains some interest in the property

a. Lease/easement2. Instantaneous – a shared interest for a fleeting moment

a. Sale/Gift/Mortgageiii. Example of no horizontal privity

1. No transaction at all, just neighbors making an agreement but not selling property to one another

2. Or the timing is off a promise made at a time other then when there is transfer or property

e. Vertical Privity of Estate – focuses on relationship between the original and promising parties and successor owners, seek to ensure that successors have a sufficient connection to the land burdened or benefited by the covenant

i. Strict vertical privity – look for transfer of property interest with no future interest retained

1. Leases do not qualify

ii. Relaxed vertical privity – exists if successor is possessor even if not owner1. Leases do not qualify

iii. No vertical privity – just a neighbor who is not in chain of title of burdened or benefited parcel

f. Implied Reciprocal Negative servitudei. Common grantor/developer

ii. General scheme or plan of development1. Multiple conveyances2. Deeds out with substantially uniform restrictions3. Other evidence

iii. Record notice – by looking at deeds to other properties showing restrictions on other properties

g. Changed Conditions Doctrinei. Where fundamental change occurs in intended character of neighborhood

ii. Such that there is no substantial benefit to enforcing it1. The essential purpose of the covenant is defeated

h. Relative hardship – focuses on the servient estatei. Covenant will not be enforced:

1. Where the harm to sevient estate2. is greater by a considerable magnitude3. Than the benefit to the dominant estate

i. Termination of Covenantsi. Release by written agreement

ii. By its own termsiii. Abandonment (tolerated violations by other landowners or other evidence)iv. Acquiescence (toleration of violation by servient estate)v. Laches (unexcused delay in enforcement by dominant estate and servient estate

reliance on inaction)vi. Estoppel (dominant estate orally agrees not to enforce)

vii. Prescription (without permission servient estate violates covenant in open and notorious way for statutory period)

viii. Marketable title acts (in some states easements must periodically be rerecorded to be binding on future owners where fundamental change occurs in intended character of neighborhood)

ix. Changed conditions doctrine (traditionally ONLY applied to Covenants NOT easements)

x. Relative Hardship (traditionally ONLY applied to Covenants NOT easements)j. Policy Behind Rule Against Unreasonable Restraints on Alienation

i. Is concerned about limitation on transferring propertyii. Alienability promotes

1. Improvement of property – allows shift to more valued use2. Liberty of current owners – escape the dead hand of control3. Equality/anti-discrimination – promotes widespread access to property

k. The Rule Against Unreasonable Restraints on Alienationi. TEST: Does limitation effect ability to transfer property

1. If so is restraint on alienation reasonablea. Balance the benefits of restraint verse the harm from restraint

2. Consider the purpose of the restraint

3. Is application of the rule likely to effectuate (achieve) those purposes4. Consider whether exercise of power is arbitrary or impermissibly based

on malice or discriminationl. Overall Regulation of Covenants for Reasonableness

i. Balance importance of Rule’s objective verse the interests infringed uponii. Covenants in existence and with notice pre-purchase have a presumption of

validityiii. Validity of post purchase covenants/rules are evaluated more rigorouslyiv. Consider community interests

1. Economic interests (effects on marketability)2. Reliance3. Security4. Freedom in regulating community life

v. Consider individual owners interests1. Economic interests (marketability)2. Reliance3. Security4. Freedom from regulations5. Consider societal interests

IV. ExceptionsV. Licenses

a. Permission to enterb. Need not be in writingc. Terminable at will of grantord. Non-transferable

i. Exception tickets

Medium Outline

Easements

An easement is a privilege to use the land of another.

An affirmative easement is one entitling its owner to do a physical act on the land.

A negative easement allows the owner to restrict others from doing certain deeds on the servient estate.

Definitions: 1) Dominant estate-Property getting the benefit of the easement

2) Servient Estate-Property burdened by the easement

Licenses-Permission to enter another’s land

-Revocable

-Can be explicit or implicit

-Not transferable

-No Statute of Frauds issues

Profit a prende-Right to enter another persons land without liability for trespass, and remove minerals, wild animals, and fish for profit. A person with a profits interest has an easement to venture onto the property as necessary to enjoy the profits interest.

I. Implied Easements

A. Easements Implied from prior use

i) Necessary elementsa) The unity of ownership is severed (i.e. there was a common owner and

then the land was divided.)b) The use was in place before the parcel was severedc) The use must have been visible or apparent at the time of the

severance(Roads and sewers)d) The easement is reasonably necessary for the enjoyment of the

dominant estate (necessity)

B. Easement Implied by Necessityi) Necessary elements

a) A common owner severed the property (unity of ownership)b) No prior use requirement-I.E. not requirement that the use was in place

at the time of the creation of the easement. c) There was a necessity for egress and ingress existed at the time of the

severance (There was a need for the easement at the time of the severance.)

d) The easement is strictly necessary for egress from and ingress to a landlocked parcel.

C. Easement by Prescription-Adverse Usei) Necessary Elements

a) Same as adverse possession-Actual use

-Open and notorious

-Hostile use

-Continuous and uninterrupted use

-Exclusive use (in a minority of states)

-For the prescribed statutory period

D. Easements by Estoppel i) Definition-Created where A allows B to use A’s land (by license) under

circumstances where A should reasonably foresee that B would rely on that license for a period of time.

ii) Permission PLUS investment (reliance)iii) Failure on the part of the A to stop the use (Like adverse possession)

iv) Counter-argument-Most courts will not grant this easement if the claimant should have verified his rights before investing in the property.

v) Examples: Purchasers from a developer who buy after seeing a plat will succeed if the plat showed roads in the subdivision in getting the right to use those roads.

vi) Some courts don’t recognize this because of SOF issues. They grant an irrevocable license which does not need a writing.

vii) Some courts use the part performance theory viii) One or two states don’t allow any of these theories.

II. Requirements for Running with the Land A. Burdens running with the land

i) Must be described in detail in the deed (or some other form)ii) Intent by the grantor that the easement should run with the landiii) Notice

-Actual-Explicit knowledge

-Inquiry-Based on the physical condition of the land (I.E. a roadway across your land)

-Constructive-Recorded in the deed or title

B. Benefits running with the landi) Intent-Did the grantor intend for the benefit to run?ii) Notice of some kindiii) Easement in writing

Express Easements

An express easement must be in writing to satisfy the statute of frauds.

When a grantor conveys property to someone else and maintains an easement for himself, this is called an easement by reservation

A. Appurtenants- Benefits the possessor of the land (Most common)(Dominant estate. The land that is burdened is called the serviant estate)

i) Subdividable (Presumed, unless the intent of the grantor was that it not be)ii) Must look to the language of the deed to determine the limits of the easement.iii) The determinative test is whether the benefit is intimately tied to a particular

piece of land (the dominant tenement)

iv) Fully transferable and the burdens and benefits run with the land.

B. In Gross- An easement in gross is sometimes called a "personal" easement. It is not tied to any particular piece of land.

i) There is no dominant estate; the burden is imposed on the servient estate with a benefit that runs to a person or entity rather than with the land.

ii) It does not "run with the land" and cannot be transferred or inherited. (Not assignable), unless it is a commercial easement(presumed transferable)

iii) Pipeline easements and other public utility easements are easements in gross.iv) Exclusive and Non-exclusive easements:

a) Exclusive easements in gross are those where the easement holder has the sole authority to authorize others to use the easement. The person has the right to permit many others to use the easement as long as the burden on the servient estate does not amount to a surcharge or misuse of the easement.

b) Non-exclusive-One in which the easement holder can not prevent the servient estate from granting the right to use the easement to other persons. Can’t be subdivided or apportioned any rights to the easement.

Termination of Easements

1) By an agreement in writing2) By their own terms-“This easement will only last 10 years”3) By merger (When the dominant estate and the servient estate are owned by the same person)4) By abandonment-Intent to abandon must be shown by explicit statement. Words alone are not

sufficient 5) Adverse possession- Stopping the person from using the easement6) Courts may sometimes terminate by “frustration of purpose” (I.E. the easement is no longer

needed)7) Some states require a re-titling of the easement every 50 years or so

Transfer of Easements

When the title of a servient estate is transferred, the burden of the easement remains with the land.

When there is a benefit on the land, it depends on whether the easement was an appurtment or in gross. An appurtment normally passes with the transfer of the dominant estate. Also if the dominant estate is such that each of the smaller lots can benefit from the easement, then each will generally be permitted to do so.

-Easements in gross under common law are not transferable. Modern view holds that easements in gross used for commercial purposes are transferable.

Restrictive Covenants

To enforce the burden to run with the land

1) In writing

2) Clearly intended to run with the land-Benefit/Burdens

3) Notice

-Actual

-Inquiry

-Constructive

4) Touch and Concern the land (Reasonableness of the covenant)

Does the covenant restrict the quality and mode of enjoyment of the land?

(I.E. Residential Limits, Homeowners Assoc. Fees, Reasonable restrictive covenants)-The third restatement eliminates the touch and concern requirement.

5) Privity- (Economic Damages only)

Horizontal-Mutual promises between the two parties and there was a transaction of the land at the same time as the promise. (Instantaneous)

Examples-Sales, Leases (Mutual), Grant of an easement (Mutual)

a. Running of burdens: i. For burden to run to an assignee, the covenant must be formed at the time of the horizontal privity.

b. Benefit – Privity is not required in most jurisdictions for running of benefit.

Vertical-Privity between an original party to covenant and a subsequent assignee. Does not have to be direct.(I.E. The previous owner was not an original but was assigned the land by an original party)

Public Policy Rationale: reason for privity requirement was to keep land free of burdens undiscoverable by purchaser inspecting the land. Since a benefit increases marketability there is no requirement of privity.

i) Strict Vertical privity (The seller did not retain any interest in the property-I.E. full sale)

ii) Relaxed Vertical privity (Seller retains some interest in the land) (Most states allow this) (I.E. Whitensville)

-Leases and subleases

a. Burden: privity requires that assignee succeed to the identical estate owned by promisor.1. Estate must be of same duration(i.e. if you had a fee simple and you gave

someone a life estate, there would be no vertical privity.) Covenants run with estates in land - only will run with identical estate

2. minority rule - no privity required to enforce a burden (3rd Restatement)

b. Benefits: Traditional rule holds that a benefit can be enforced by anyone who has taken possession of the promisee’s property with the promisee’s permission.

B has promised A that B and his assigns will never use Blackacre in a certain way (e.g. for retail purposes) and that if they do they will pay damages. The issues are whether B’s assignee, D is burdened by this promise (i.e. can be liable for damages) and whether C (A’s assignee) can benefit

Damages for a Breach of Covenant-If all 5 burdens are satisfied, then you can get injunctive relief and economic damages. If only the first four elements are satisfied, then you can only get injunctive relief)

Policy against enforcing a benefit in gross

-A benefit in gross: some one who no longer owns a property is attempting to control the land (Not enforceable) (I.E. Developers after they have fully developed the land)

-Exception: Homeowner’s association

To enforce the benefit to run with the land

-Intent to run

-Touch and concern (Presumption that if intent to run with the land is satisfied, then touch and concern is satisfied)

-If the benefit touches and concerns the promisee’s land, the benefit will run though the burden does not. That is, the benefit can run even if the burden is in gross, i.e. personal to the promisor.

Covenants against Competition

Reasonable covenants against competition may be considered to run with the land when they a serve a purpose of facilitating orderly and harmonious development for commercial use. (Whitinsville Plaza)

Changes in the area

A restrictive covenant will not be enforced where a fundamental change has occurred in the intended character of the neighborhood that renders the benefits underlying imposition of the restrictions incapable of enjoyment. The entire neighborhood does not need to be changed in order to determine if the covenant is still needed.

Equitable Servitudes

1. Definition: 2. Requirements

a. Touch and Concern : both real covenants and eq. servitudes must touch and concern the land

b. Notice : Neither is enforceable against a bona fide purchaser without notice

c. Creation-Need not be in writing.

d. Enforcement by or against assignees (requirements)

3. Intent

a. no technical words (i.e. “assigns” - see covenants running at law) are required

b. look to purpose of covenant and surrounding circumstances

4. Privity of Estate - generally not required

a. tracing title - some states require person seeking to enforce to trace title to original promisee (i.e. must be able to trace to original subdivision purchaser) (minority view)

b. Third Party Beneficiary - majority of states allow 3P beneficiary to enforce covenant in law or equity if contracting parties so intend.

c. Distinguish - easements - easements cannot be reserved in favor of 3rd parties

5. Touch and Concern Requirement-The big idea, is that the covenant must have something to do with the way land is used or enjoyed, it must connect to land use. If it is a promise that is integrated with your property rights and flows to successsor owners of the property, even tough they themselves did not make the promise, the touch & concern element ensures that the promise will stick only if it is connected to the property itself (and is not in the nature of a personal K).

Most covenants do touch & concern the land, for example: a covenant banning commericial uses satisfies the rule because it governs how the land is used by WHOEVER IS THE OWNER. It connects to the property, not the individual owner. Affirmative covenants (like the obligation to pay association fees) have historicaly been more controversial, but now are uniformly held to touch & concern the land.  Why? even though it is a promise to pay money that feels more like a personal K, the fee connects to the property and enhances it value and quality.          

a. generally: touch and concern is a general notion - affecting physical use or enjoyment or economic value may qualify.

b. Negative Covenants - touch and concern by restricting what owner of burdened land can do; also enhance the value of benefited land.

i. Covenants not to compete

ii. but note: in some jurisdictions this do not touch and concern. rationale: disfavored covenants because they are anti-competitive

c. Affirmative Covenants-Modern view - permit affirmative covenants to run both in law and equity; usually held to touch and concern

1. exception: an affirmative covenant that imposes a substantial burden on property which receives no benefit from it and has no clear expiration date may be found not to touch and concern

2. Covenant to pay for water has no means of expiration; thus doesn't touch and concern even though there is intent and privity; so it does not run.

3. Perpetuity Problem

a. covenants w/out time limitations are problematic

i) probably will not touch and concern for affirmative covenants

ii) may need statutory support for negative covenants (i.e. historical preservation)

b. touch and concern used as a catch-all for policy concerns - doesn't just deal w/ physical nature

c. Want to avoid undue restrains on alienation that last forever

i) need to have some mechanism to get rid of covenants if conditions change

ii) note: because changed conditions is an equitable doctrine this is especially important for real covenants / enforcement at law

6. Notice-Must be actual, constructive or inquiry notice

Implied Negative Reciprocal Servitudes

Implying covenants on land that are not specifically stated

Rules:

a) Must prove a common plan(look at the pattern of the developer when they start selling the plots) and a common grantor(the landowner group)

i. What constitutes a common plan? Must find a suitable number of lots in a subdivision are subjected to a common covenant. A variation in the terms or incidence of the covenants may indicate that the common owner did not intend a common scheme.

ii. When does a common scheme begin? Lots may be sold before a common plan is developed. Lots sold before the common plan are not subject to the covenant.

iii. Geographic Boundaries of a common plan-Look to the circumstances and facts of what the developer intended.

b) Look for promises common on a number of a tract of lands. (Numerous tracts of lands with the same promises attached to them), look how the property is platted(mapped) out, look how the development is advertised and what the other residents were told. This is after the land has already been platted.

c) One part of the development (with similar structure and platting) can have restrictions on it and another doesn’t have to.

Example: The McLeans owned property in which they wished to build a gas station. The parcel that they owned had no restrictions on it, but the majority of parcels around them had restrictions limiting the use to residential purposes. There was a common grantor. 53 of 91 lots had restrictions. The court held that the McLeans were on constructive notice as of the restrictions on the neighboring parcels and inquiry notice as to determine whether the restrictive covenants on the neighboring parcels could interpreted as a plan to restrict the entire neighborhood to residential uses. Since the majority of the neighborhood was residential, the court inferred that the intent of original owner was to create a common plan.

The California court has found that a covenant must be recorded in a deed at the time of purchase to apply.

Ambiguity

When there is any ambiguity or substantial doubt in the meaning, restrictive covenants will be read narrowly in favor of the free use of property.

Restraints on Alienation

Definition: A limit on the free sale or transfer of property. Generally seen as unenforceable, but in modern times, there are situations where it can be enforced. (Life estates, land use restrictions, fee simple defeasible)

-Balance the consequences of the restraint versus the benefits that the restraint will allow.

Take land off the market, making it unusable for the best use; unmortgageable; unimprovable; concentrates wealth; prevents creditors from reaching it

-In condo association situations, the power to withhold consent on the free sales of a condo to a fair purchaser is a restraint on alienation. The association could get around this if it found a purchaser on its own for a fair market value.

-The test for the right of first refusal is one of reasonableness is whether the refusal is rationally related to the protection, preservation, or proper operation of the property and the purposes of the association’s governing documents. Secondly, the power must be exercised in a fair and nondiscriminatory manner. To withhold sale for race, sex, or other discriminatory reasons is a restraint on alienation.

Altering leases to restrain alienation

The owners of the condos purchased their homes with the knowledge that their leases were amendable with the additional restriction. Additionally, the restriction does not violate any public policy. The owners of condos are on constructive notice that their ownership rights are not unlimited and are subject to special limitations that would not be applicable to other ownership situations. (Woodside Village)

Developer Controlled Property

Provisions allowing amendments to restrictive covenants are subject to the reasonable test. -Elements that the court should consider in balancing its reasonableness test1. The character of the interest to be protected2. The relative adequacy to the plaintiff of injunction in comparison with other remedies3. The delay if any in bringing suit4. The misconduct of the plaintiff if any5. The interest of third persons6. The practicability of granting and enforcing the order or judgment7. The relative hardship likely to result to the defendant if an injunction is granted and to the plaintiff if an injunction is granted and to the plaintiff if it is denied.

-Uniform rule of balancing is based on presumption that the developer is doing something underhanded. -The purchasers of the land have reliance that everyone is required to follow the same plan.

-Also of consideration is the amount of money invested in the land, based on that reliance.

Counter-ArgumentThe developer may argue that since he has the most votes in the association, based on his land ownership, that he should be given the chance to exercise his franchise. Plus, the original deed stated that the board had the ability to alter the composition of the development. That constituted constructive notice to the other land owners. Plus, there might be a public policy argument stating that the ability to subdivide increases the value of it.

Public Policy

-It is impossible for the condo to list every specific condition banned. When a condo constitution specifically allows the Board to ban certain things and conditions to create a uniform exterior, unless there is some compelling reason, condo boards are given deference in their decisions. (O’Buck)

-The appellate court found that the right to assemble was traditionally limited to political and social reasons and that the potential for possible conflict with the other religious groups who desired to use the auditorium. Such a restriction meets the standard for reasonableness required. (Neuman)

Under the reasonableness test, the covenant does not meet the reasonable length requirement (since it was a 40 year lease) and since the covenant restricts the use of land specifically situation for use as a supermarket, the covenant is too contrary to the public good. (Davidson)

Ways to terminate Equitable Servitudes and Covenants1) By the terms of the covenant (Specified # of years pass or a specified condition occurs)2) Merger3) Release-Written release by the benefitted property holder 4) Acquiescence-Pattern of violations leading almost to abandonment 5) Abandonment-High number of landowners in a common scheme violate the covenant to such

an extent that there is a significant change to the neighborhood6) Changed conditions-Covenants can be terminated if the conditions in the neighborhood have

so changed that the covenant no longer serves its intended purpose7) Relative hardship-If the harm to the burdened property is disproportionally great compared to

the benefit to the neighboring properties, courts will not enforce a covenant.

Real Estate

Disclosure of defects

Old Rule: Caveat Emptor-Puts the burden on the buyer because since they are spending the money, they should take a full inspection of the property they are buying. On the opposite side, the buyer is operating from a weakened bargaining position and is vulnerable to manipulation by a seller.

New Rule-Obligation to disclose facts that 1) materially affect the value of the house and the buyer would want to know about and are not readily observable.

Title Covenants

-Waiver of disclosure: Must be a very specific disclosure. General merger clauses don’t count, unless they have a very specific “as is” clause. This is very controversial and is not followed by all jurisdictions.

-Implied warranty of habitability-The developer has a superior knowledge and is assumed to have provided a product (new residential house) that is fully habitable. That implied warranty may or may not be waived. This is limited to only the home’s builder, not a reseller.

-Marketable title-The seller has the obligation to provide a fully marketable title. Free from reasonable doubt, but not every doubt. It will likely be free from title defects and encumbrances and other person’s interests in that property. There must be disclosure of any easements or liens or mortgages. If there is a problem that is not disclosed, the buyer can get out of the sale and possibly get damages. Generally, a title is unmarketable if there is a legitimate risk that the buyer would be subject to legal actions (adverse possession, creditor’s rights) if the purchase goes through. A purchaser is not required to buy a lawsuit, so to speak.

Buyer’s remedies for breach of the purchase and sale agreement

-Specific performance forcing the sale of the house.

-Damages-the differences between the market value at the time of breach and the contract price.

-Rescission

-Vendee’s Lien-There is a debt owed by the seller to the buyer.

Seller’s Remedies

-Specific performance-

-Damages-

-Rescission and forfeiture of down payment

-Vendor’s lien-

Equitable Conversion

The person who is the buyer has equitable ownership during the executor person and the liability is on them at that point. In some states, the insurance on the house is given to the equitable owner, but not in all states. Therefore the seller gets the purchase price, plus the insurance money.

Formalities

The deed must 1) identify the parties 2) describe the property being conveyed 3) state the grantor’s signature 4) contain the grantor’s signature. There must be actual intended delivery and not just physical delivery. Recording is not required but its stupid not to do it.

Present Covenants

a. Warranty of title - Present Covenants from the grantor to the grantee, starting at the date of the sale.

b. Covenant of seisen -I promise I own the property I’m selling and have the type of estate I say I do(fee simple)

c. Covenant of the right to convey the land . Full alienationd. Covenant against encumbrances -Promise that there are no mortgages, liens,

easements. Things that would decrease the property value.

Future covenants-starts at discovery of the defect or breach

I. Covenant of warranty

a. General warranty deed-seller will protect against all defects in the title.

b. Special warranty deed-I promise to warranty against defects the seller’s has caused

c. Quitclaim deed-Representation by the seller that he releases my claims to this asset, if I have any.

II. Covenant of quiet enjoyment-No one will disturb your title

III. Covenant for further assurances-I promise to be affirmatively bound to fix any future problems.

Types of recording acts

-The first person who records good title to the property is the true owner of the property unless the 2nd owner is a bona fide purchaser (someone who bought the property for fair value, based on a statutory provision. Some states require the 2nd buyer be unaware of the title problems. And some states combine the two)

I. Race statute (only 2 states)-The person who records first will prevail. Knowledge is irrelevant.

II. Notice statute (half the states)-Requires the person who was a bonafide purchaser not know that anyone else had claim to the land. Actual notice, inquiry notice, constructive notice will suffice.

III. Race-notice. Must win the race and have no notice of the other conveyance.

Notice to subsequent claimants

In virtually all jurisdictions, the subsequent purchaser will lose if he was on notice of the earlier conveyance

A. Actual Notice: If the subsequent purchaser is shown to have had actual notice of the existence of the prior unrecorded interest, he will not gain the protection of the recording act in a notice or notice-race jurisdiction.

B. Record Notice: The subsequent grantee is deemed to have record notice if the prior interest is adequately recorded. However, the mere fact that a deed is recorded somewhere in the public records does not mean that the recording is adequate-the document must be recorded in such a

way that a reasonable searcher would find it. Imputed knowledge-If proper recording of the earlier document took place, subsequent purchasers are on “record notice” even if they never actually see the document that has been filed. That is, the court imputes to the subsequent purchaser the knowledge which he would have had obtained had be conducted a diligent title search.

C. Inquiry Notice: Even if a purchaser has neither record nor actual notice of a prior unrecorded conveyance, he may be found to have been on “inquiry notice” of it. Inquiry notice exists where a purchaser is in possession of facts which would lead a reasonable person in his position to make an investigation, which would in turn advise him of the existence of the prior unrecorded right. Such a person is on inquiry notice even if he does not in fact make the investigation. (But the purchaser is responsible only for those facts which the investigation would have disclosed) Possession-Thus if the parcel is possessed by a person who is not the record owner, this will place a subsequent purchaser on inquiry notice. That is, the purchaser must: 1)view the property to see whether it is in the possession of someone other than the record owner; and 2) if there is such a possessor, he must inquire as to the source of the possessor’s right in the property.

Fraud

A forged deed is always void. A fraudulent deed is voidable, if there is no BFP yet.

Financing

People who buy property and borrow money have statutory rights.

1) Borrower must sign a promissory note, usually with collateral (a mortgage)2) If the borrower defaults, the lender has the right to the sell the house

Low bid problem- Must have public notice of the public auction. Usually there is a small # of bidders which keeps the price down.

Statutory right of redemption-Post foreclosureEquity of redemption-Pre foreclosure.

If the sale price of the house is below the value owed on the debt, the borrower still owes the remaining debt. In some states, this is not the case. There is such a thing as an anti-deficiency statute that says the sale of the house satisfies the debt, but in that case, the bank gets an excellent price on the sale of the house.

Sometimes, the buyer borrows from the seller. The seller acts as a lendor.

INSTALLMENT LAND CONTRACT

a. No bank will lend you money. You make a deal with the seller- Seller Sally will finance for you. Here is what you sign up for:

b. Title: she’ll keep title.

c. repairs: borrower lives there, pay taxes, repairs etc- in every way as if you own it

d. forfeiture: you lose your interest and sally keeps property if default.

e. Liquidated damages: what happens to the money you paid?

Usually the K provides that the person owed the debt (the lender Sally) will just keep whatever you have paid up to the time of default.(this contract term is called a liquidated damages clause)

This may or may not be enforceable, depending on what state you are in and depending on whether the K term for damages is considered a legitimate liquidated damages clause or is instead excessive and is considered a "penalty" to the defaulting borrower.

Current Status of Law (p. 809-812)

a. some states ignore the liquidated damages clause and simply treat the installment land contract as if it were a traditional mortgage. Sebastian p. 808 takes this approach it is described in note #1. The borrower will have all the protections the law provides for a mortgagor. he may try and avoid foreclosure by using the right to equity of redemption. If the foreclosure occurs, the money paid to the lender pre-foreclosure will be treated like

mortagage payments that reduce the debt, and the proceeds from the sherrifs sale will pay off the balance of the debt owed, and any excess proceeds will be retained by the borrower.

b. some states will choose whether or not to 1) treat the debt as a traditional mortgage or 2) enforce the K as an installment land K, depending on a list of factors. this approach is described in note 2, p 810.

b. Some states retain traditional installment land K doctrine. The Stonebreaker case p 806, and note 3 p. 810 describe this approach. If this approach is taken: 1) the borrower will be evicted. 2) the borrower may or may not get back some of the money they have paid to the lender. In other words, the liquidated damages clause may or may not be enforceable. It depends on whether it is viewed as a penalty, in which case it will NOT be enforced or whether it is indeed a legitimate liqudated damages clause.To determine this the court will look at what the actual damages amount to. Damages include the amount of rent that the possessor (the borrower) would owe if they had been a tenant ("lost rent" is counted as a damage since the title holder (sally the lender) lost the right of possession on account of the K. Add to that any attorney's fees, costs necessary to repair the property and any costs for having to find a new buyer. Once all the damages are added up, you compare the actual damages to how much the borrower has paid the lender and see if the amount paid to date to the lender is "grossly disproportional to actual damages". If it is NOT grossly disproportional, then the lender can retain all amounts paid. If it is grossly disproportional, then it is a "penalty" and the lender cannot retain the full amount paid. The lender must refund to the borrower, the difference between actual damages and the amount paid to the lender.

Group Outline

Property II Outline.

Draft Person should consider the following:

- Creation o In gross or appurtenant

- Definition /Limitationo Purpose & Scope

- Obligation o Repair issues

- Duration o Express (ends on this date)

- Succession o In gross / appurtenant

- Termination o Express or Not

- Location /Relocationo Majority Default not unilateral

- Statutory Requirementso (Real Estate Transactions)

Easement – a grant of an interest in land that entitles a person to use land possessed by another

- Non possessory right, can own an easement but easement is not owning the land

Reservation and Exception

- Reservation – retains for the grantor a newly created property right.- Exception – retains for the grantor a preexisting interest in a described geographical part of

the property or recognized a previously existing property right in a third party.

1) Dominant vs. Servient Estate a. Dominant – land benefited by the easementb. Servient – land subject to (i.e. burdened) by the easement

2) Affirmative v. Negative Easements a. Holder has the right to do things which, were it not for the easement, they would not

be permitted to do.i. As a general rule, an easement appurtenant to one parcel of land may not be

extended by the owner or the dominant estate to other parcels owned by him, whether adjoining or distinct tracts to which the easement is not appurtenant.

1. However, misuse without an increase in the burden on the servient estate is not sufficient harm to overcome considerable hardship

a. If landlocked statutory condemnation to get RoW Easement.b. Holder may prevent the possessor of the land burdened by the easement from

performing acts upon the land that he would otherwise have a legal right to perform.3) Appurtenant v. In Gross

a. Appurtenant belongs to who owns the land dom. & servient estate.i. When dominant estate is transferred any easement appurtenant to it

automatically passes with it and cannot be conveyed w/o simultaneously transferring dominant estate.

ii. Assumed Appurtenant b/c1. most are intended to be appurtenant2. since it passes automatically with a grant of the dominant estate,

default tends to protect the grantee from consequences of an inadvertent failure to include a separate grant of an easement

3. any detriment to servient estate is usually offset by a benefit to dominant estate

iii.b. In Gross May be personal to the easement owner servient estate

4) By Grant or By Reservation a. Grant – created by a written instrument grant of easement to granteeb. Reservation – an easement in favor of the grantor who convey a fee or interest to

another.

Express Easements – in writing, identify grantor and grantee, words, description and signed by grantor.

- Creation o Express Easement Elements

In writing Identifies grantor and grantee Words of purchase Description Signed by Grantor

o Grant vs. Reservationo Fee presumed unless lesser estate intended

Grant construed in favor of the Grantee If intention is in doubt consideration given to situation and circumstances

If intention is clear from the language of the deed, then it will be given effect regardless of technical rules of construction.

Factors in determining whether a deed to convey FS title or an easement

o Amount of consideration o The particularity of the description of the property conveyedo The extent of the limitation upon the use of the propertyo The type of interest which best serves the manifested purpose

of the partieso The peculiarities of wording used in the conveyance documento To whom the property was assessed and who paid the taxes on

the propertyo How the parties to the conveyance or their heirs or assigns

have treated the property. Professor Williams Notes on Factors

o Consideration paido Descriptiono Language – right of way/acrosso Needs of the partieso Restrictions on use.

Public policy discouraging separate ownership of narrow strips of land

- Interpretation/Extent o Extent of Easement

Dominant Reasonable use of servient land cannot unduly burden or neg. impact

Servient any use of estate so long as there is no interference w/ easemento The holder of an easement or profit is entitled to use the servient estate in a manner

that is reasonably necessary for the convenient enjoyment of the servitude.o In determining intent of the parties concerning scope courts have considered:

Whether the easement is granted or reserved The amount of the consideration, if any, that the original beneficiary of the

easement gave for the easemento Changes to Easements

Location CL Rule: Relocation By Consent (majority)

o (mutual consent for relocation) agreement of both partieso Burdens on dominant parcelo Erosion of easement holders rightso Devalue the easement (consideration)o Judicial efficiency

w/o dominant consent?o Unilateral Relocation (minority)

Best use of servient estate Encourages grants of easements Purpose of easement not detrimented

CI: can at own costs move w/o consent but only if it does not significantly lessen the utility of the easement or increase burdens of the estate owner or frustrate the pupose for which it was created.

o Substantially similar w/o frustrating the purpose.

Use Dominant cannot unduly burden or negative impact Servient any use of estate so long as there is no interference w/

Easement Can change intensity of use over time, but not kind of use General rule when an easement is created by grant or reservation

and the instrument creating the easement does not limit the use to be

mae of it, the easement may be used for “any purpose to which the dominant estate may then, or in the future, reasonably devoted.”

Repairs Owner of easement has duty to make repairs to easement

o Servient estate owner has no obligation to repair easement But may for reasons of use & tort liability

Owner of easement has right to improveo Ex. Paving.

So long as you don’t unduly burden the servient land.- Succession

o Appurtenant Absent an express provision in deed stating otherwise, an appurtenant easement is presumed to be transferred with the dominant estate. (if want In Gross have to be explicit and in writing)

Succession to Dominant Estate If the terms provide that the easement will be extinguished upon

transfer such will be the case If the terms provide that upon transfer the appurtenant easement will

become an easement in gross for the benefit of the transferor such will be the case

If the deed creating the easement prohibits its transfer with the dominant estate but does not specify the consequences

o Either the easement is extinguished; ORo The provision is ineffective and the easement passes with the

dominant estate. An attempt to transfer an appurtenant easement separately from the

dominant estate would not be effectiveo But would usually not extinguish the easement

Succession to Servient Estate If servient land transferred, easement runs and enforceable against the

successors of the servient estateo In writing, Intended it to run, had Notice.

If no expressed contrary intention in the granting instrumento Courts presume intended it to run

If successor purchases the servient estate w/o notice of the easemento Most modern statutes extinguish the easement.

Burden of easement runs if intent and notice requirements are satisfied.

Benefit presumed to run with the land Burden if the following runs with the land

Writingo Original easement (b/t A& B) must be in writing

Intent presumedo Intent in original easement (b/t A & B) must intend to run

Notice actual, inquiry, constructiveo Actual (in deed) o Inquiry (factual circumstances/reasonableness std.)o Constructive

o In Gross Commercial question.

If commercial presumed assignableo Economic gain

If non-commercial presumed non-assignableo Personal satisfaction non- assignable unless in writing

Some jurisdictions have adopted restatement view that says all assignable unless parties agree otherwise.

Older View

If the primary purpose of the easement is to gain personal satisfaction the easement is deemed non-commercial presumption not assignable.

In determining the intent of the parties court will look too The r/t b/t the grantor of the easement and the grantee

The more personal the r/t, the less likely the parties indeed the easement to be assignable

o The degree to which assignability of the easement increases the burden on the servient estate.

Either by increasing its use or decreasing its value The greater the burden, the less likely the

owner of the servient estate intended the easement to be assignable.

o Consideration paid for the easement The purchase price should reflect the intention of the

parties as to alienability The greater the cost of the easement, the more

likely the parties intend the grantee to be able to recoup some of those costs by selling the easement

o Degree to which the use of the easement is temporary and personal.

If the use is temporary and personal, parties probably intended the easement to be used only by the grantee for the time designated and so is probably non-assignable.

o Two times when the ct. is justified in considering all the facts to determine intent of parties

Where the extent and reasonable use of the easement is an issue Where the language used is ambiguous

CHART ON P. 404

- Termination – Once Terminated easement gone/done/over forevero Express

Duration Breach of Condition Purpose Accomplished – or Purpose becomes impossible to accomplish

o Subsequent Events – Default rules Misuse

that cannot be prevented by injunction Severance

try to transfer easement and not dominant estate (in appurtenant) severed and thus terminates

Release in writing

Abandonment non use + intent

Merger cannot have easement in your own land

Involuntary Destruction terminates (acts of god)

o Voluntary destruction D terminates // S does not terminate

- An express easement can terminate in accordance with the terms of its creation or through extinguishment as the result of subsequent events

o Termination Created to last for a specified period of time Created to serve a particular purpose

o Extinguishment Release

Dominant Owner may terminate by releasing the easement in a formal written instrument.

o Must meet the requirements necessary to create an easement. Abandonment

Dominant Owner may terminate by abandoning the easemento Manifested in unequivocal conduct sufficient for that intent.

Failure to use for authorized use Non-use alone is seldom sufficient (need intent)

o Cts. More willing to find abandonment in easements than other interests b/c clears up titles and encourages full use of the servient estate.

Dominant Owner may terminate by improper exercise of his rights. Misuse and Overuse generally not sufficient

o Has to be of the kind which cannot be prevented by injunction to terminate

Although servient can get an injunction to enjoin excessive use.

Servient Owner acts or conduct may extinguish easement. (writing, intent, notice) Easement will not run if bona fide purchaser for value w/o notice

o Ex. Easement owner does not record easement and inspection of property does not give notice.

Servient owner can extinguish by making adverse use of the parcel for SOL necessary to acquire an easement by prescription.

Merger Dominant and Servient Owner conduct together to extinguish

easemento Dominant acquires title of Servient estate

Extinguishment by Estoppel Requires actions on the part of both Dominant and Servient When servient owner reasonably relying on the actions of the

dominant owner, engages in conduct inconsistent with the continuance of the easement.

o If servient owner would suffer unreasonable harm by a restoration of easement rights, the easement owner is estopped from asserting these rights

The easement is extinguished. Third Parties – can be done against the will of both Dominant and Servient.

Eminent domain Mortgage foreclosure Tax Sales

o Punitive Damages Only where a wrongful act is accompanied by aggravating circumstances such

as willfulness, wantonness, malice or oppression that such damages are recoverable.

- Compared to Licenses – non-possessory right to use land of another, merely permission to enter py.

Limited Temporary Specific Purpose Personal to Licensee Often implied but can be written or oral Revocable at will Not-transferable (default rule) Cannot be inherited or given by will

Terminated at Will of Creator Differs from Easement

Can be Oral Easements subject to Statute of Frauds so need to be in writing

Easement for a more designated area For a specific time or perpetuity For more consideration For improvements or repairs Control over what happens

o License v. Easement License – a privilege to do certain acts of a temporary character on the land of

another which is revocable at will of a licensor unless a definite time has been specified, or unless it is coupled with an interest.

Easement – non-possessory interest in land of another An Easement differs from a license in that a license generally grants

permission to do something on another’s property. Whether license or easement exists factors to consider

Intent of the parties Duration of right created (permanent?) Amount of consideration given for the “right”

o “right” could mean right in land or a license. Reservation of power to revoke that “right” Nature of “right” created – obligation the parties have agreed to

Implied Easements

– Easement not in writing o arises out of r/t of parties w/o some sort or express agreement.

Courts disfavor – but w/intent law infers easement– Easement implied by Prior Use

o Arises when land conveyedo Elements

Common ownership Visible benefit Used long enough intended to be permanent Reasonably necessary for enjoyment

o Scope prior use establishes Scope.– Easement implied by Necessity

o Arises when land conveyedo Elements

Common Ownership Land Severed Severance creates the necessity

If landlocked sometime after severance do not have IE by Necessityo Scope whatever is “reasonable”

- Necessity can be judged by standard applied. Either Strict Necessity or Reasonable Necessity.o The degree of necessity required for an IE by reservation is greater than the degree of

necessity required for an IE by grant Had opportunity to create an express easement

o The degree of necessity required for an IE by Nec. is greater than the degree of necessity required for an IE by PU.

IE by PU has other factors which safeguard arbitrary IEso The more obvious, continuous, permanent, and apparent a use is, the less degree of

necessity is required for an IE by PU Other elements of IE by PU safeguard.

Prescriptive Easements 377

- Elementso Adverse and Hostile

Presumption: someone on py w/o permission If have permission cannot claim prescriptive easement

o Open / Notorious / Visible Use must be visible enough that diligent owner would know

Not actual notice standardo Exclusive

Landowner has not done something to excludeo Continuous

Uninterrupted Pattern of use Frequency consistent w/ purpose

o For Statutory Period In some jurisdictions stty period may be shorter for prescriptive Et. than

Adverse Poss.

- Easement by Estoppel starts as a license, relies on that license by their detriment becomes easement by estoppel.

-

Concept Interest in land?

Writing Req’d? Permissive or Non Permissive

Revocable at Will?

What determines Scope?

Appurtenant or In Gross?

License No

(permission to enter)

No

(can be oral, written or implied)

Permissive Yes In Gross

Express Et Yes Yes [Express]

(Subject to Stt. of Frauds)

Permissive No

(can be terminated but not @ will)

Appurtenant

(Dependant on language, intent, etc)

IE by PU Yes No. Permissive No

(IE terminate as Ex.Ets do)

Prior Use Establishes Scope

IE by Nec. Yes No. Permissive No

(IE terminate as Ex. Ets do)

Whatever is Reasonable

Prescriptive Et.

Yes No. Non-Permissive

Established by the Use

Real Covenants

- Creation and Validity - Enforcement and Running - Defenses to Enforcement

Real Estate Transactions

- Requirement of a Written Instrument - Requirement of Deed Delivery - Real Estate Brokers - Marketable Title - Recording Statutes